Correlation Between Thinking Electronic and WT Microelectronics
Can any of the company-specific risk be diversified away by investing in both Thinking Electronic and WT Microelectronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Thinking Electronic and WT Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thinking Electronic Industrial and WT Microelectronics Co, you can compare the effects of market volatilities on Thinking Electronic and WT Microelectronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Thinking Electronic with a short position of WT Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thinking Electronic and WT Microelectronics.
Diversification Opportunities for Thinking Electronic and WT Microelectronics
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Thinking and 3036A is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Thinking Electronic Industrial and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics and Thinking Electronic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Thinking Electronic Industrial are associated (or correlated) with WT Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Microelectronics has no effect on the direction of Thinking Electronic i.e., Thinking Electronic and WT Microelectronics go up and down completely randomly.
Pair Corralation between Thinking Electronic and WT Microelectronics
Assuming the 90 days trading horizon Thinking Electronic Industrial is expected to generate 5.33 times more return on investment than WT Microelectronics. However, Thinking Electronic is 5.33 times more volatile than WT Microelectronics Co. It trades about 0.02 of its potential returns per unit of risk. WT Microelectronics Co is currently generating about 0.05 per unit of risk. If you would invest 14,700 in Thinking Electronic Industrial on November 5, 2024 and sell it today you would earn a total of 1,700 from holding Thinking Electronic Industrial or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thinking Electronic Industrial vs. WT Microelectronics Co
Performance |
| Timeline |
| Thinking Electronic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| WT Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
Thinking Electronic and WT Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thinking Electronic and WT Microelectronics
The main advantage of trading using opposite Thinking Electronic and WT Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thinking Electronic position performs unexpectedly, WT Microelectronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WT Microelectronics will offset losses from the drop in WT Microelectronics' long position.The idea behind Thinking Electronic Industrial and WT Microelectronics Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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